Auto Insurance Coverage: Unforeseen Speed Bump for Some Rideshare Drivers

Posted by on Aug 28, 2017 in Business Insurance | Comments Off on Auto Insurance Coverage: Unforeseen Speed Bump for Some Rideshare Drivers

Auto Insurance Coverage: Unforeseen Speed Bump for Some Rideshare Drivers
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uber driver

The concept of ridesharing has become so popular it’s turned one brand into a common verb, “I’ll just Uber.” And we no longer get a lift but, rather, a Lyft.

Rideshare requirements

Such popularity among ride hailers has meant a surge in drivers looking to make or supplement their incomes as rideshare drivers. The requirements to sign on as an Uber or Lyft driver are straightforward enough: To qualify, a driver must be 21 or older, own a smartphone, have a four-door vehicle that meets specific company standards, have had an in-state driver’s license for at least one year, have in-state plates with current registration, pass a background check and driving record check, and have in-state auto insurance with his or her name on the policy.

This last requirement — auto insurance — is becoming the unforeseen catch that has some current and prospective rideshare drivers hitting the brakes. Uber and Lyft each provide $1 million in liability coverage and an additional $1 million in coverage if a collision involves an uninsured or underinsured driver. The coverage each company offers is identical except Uber’s comprehensive or collision deductible is $1,000 while Lyft’s is $2,500.

The real issue lies in which coverage applies — one’s personal policy or the rideshare company’s policy — during each “phase” of a ride.

  • Phase 1: The driver turns the app on with his or her smartphone to signal availability. If something happens during this “waiting” phase, neither Uber nor Lyft provides comprehensive or collision insurance. The driver must file a claim with his or her personal auto insurer.
  • Phase 2: The app signals that new passengers are ready for pickup; the driver heads to their location. En route to pick up designated passengers, full coverage by Uber or Lyft applies should an accident occur.
  • Phase 3: The passengers are in the driver’s vehicle and headed for their destination. As with phase 2, Uber or Lyft provides full coverage.

lyft driver

The loopholes

Drivers can breathe easier during phases 2 and 3, but phase 1 presents a grey area that could ultimately cost drivers their rideshare incomes as well as their personal auto insurance coverage. The reason? When a driver purchases auto insurance, the insurer is offering personal coverage, not business coverage. If something happens while “on the clock” waiting for a passenger, a driver is technically “for hire” and engaged in business activity but is not yet in that window of Uber or Lyft coverage.

So, remember that personal auto insurance required to be a Lyft or Uber driver? If an insurer drops personal coverage, that driver’s eligibility to work as a Lyft or Uber driver also vanishes. Without proper coverage, a 10-second accident could mean a driver loses his or her auto insurance and ability to work as a driver — plus may be on the financial hook for property damage and injury. Ouch!

Coverage options

uber insuranceFortunately, many insurers have recognized this problem and now offer rideshare coverage to applicable customers. Some companies call it “gap coverage,” others “hybrid coverage.” Whatever the name, it’s designed to protect a driver during that first phase of rideshare activity. While costs vary by company, some go so far as to offer continuous coverage that protects drivers during all phases of rideshare driving with lower deductibles than the Lyft and Uber policies.

However, just because an insurance company offers rideshare coverage doesn’t mean it’s available to all rideshare drivers. Insurance is regulated on the state level, so the state a driver holds his or her driver’s license in determines what — if any — gap coverage is available. For those living in states where no gap coverage is offered, a commercial auto policy may be an option but can cost significantly more than a personal policy.

Maintaining proper insurance is a must for all drivers, especially those whose incomes depend on driving. If you’re already a rideshare driver but aren’t sure if your policy includes gap coverage, be proactive and have an experienced insurance expert examine your current policy. If you’re considering the rideshare business, make insurance a top priority when weighing the costs versus benefits of entering the industry. An insurance agent who understands state laws pertaining to rideshare coverage will be a valuable partner as you embark on your rideshare journey.

Bottom line: Ignorance is not bliss when it comes to being fully protected as a rideshare driver. Understanding your limitations and options can mean building a business versus losing it and more. Contact a Concklin Insurance expert today to better understand your policies and ensure you have the insurance coverage you need.
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